Eight Capital Master Fund

The Eight Capital Master Fund focuses on the distressed and special situation investments in India. Eight Capital provides capital to financially distressed but viable companies to pay off defaulted bank debt, in lieu of new secured debt and significant equity kicker in target company. The fund prefers to invest in industrial sectors running at peak capacity due to huge demand in the booming Indian economy.

Eight Capital’s mandate is to target high-yield opportunities in India’s corporate credit markets. The fund’s edge comes from focusing on high-yield credit opportunities not addressed by local lending institutions. The absence of an INR high-yield bond market provides the structural market inefficiency to generate superior long-term returns.

Mr. Ravi Chachra is the Portfolio Manager of Eight Capital. Launched on January 10th 2006, the fund has pro actively achieved higher returns with lower volatility.

• The Investment objective of the fund is to achieve superior long term returns with low volatility.
• The fund has a low co-relation to the equity indices since most of the capital is secured with downside protection and the equity kicker is a call option.
• The fund expects to post steady returns and a spike in months when the equity starts to work.

Why Distressed Securities?

Distressed securities are the securities of companies that are

• Already in default or
• In distress or
• Under bankruptcy protection or
• Heading towards such a condition.

Since the banks and financial institutions have certain restrictions that prevent them from investing in such securities, the traded value of such securities is subjected to a deep discount.

The portfolio manager takes an activist approach to de-leverage the company by restructuring the debt and reducing the interest burden. Upon successful
restructuring, a viable company will have a healthier balance sheet, higher EPS and unfettered access to capital markets to finance expansion in revenues and profits.

How do we choose our target companies?

Eight Capital takes a broad macroeconomic view and looks for good investment opportunities in sectors showing large growth potential.

• The Investment Manager prefers companies that have strong franchises that are not easily duplicated and companies that manufacture products as opposed to those that provide services.
• The Investment Manager puts a great deal of importance on positive EBITDA, and it will be unusual for the Fund to invest in an entity that has negative cash EBITDA.
• Companies in sectors that are stable with growth potential and are operating below optimal capacity when compared to the leaders in the sector.
• Companies with committed promoters, a strong management team and a potential turnaround window of 18 – 24 months.

• Pennar
• Panyam
• Dunlop